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Tensions emerge as house prices continue to rise
A strong economic backdrop has led to a near 10-year high in consumer confidence, but evidence of tensions in the housing market have emerged as a result of rising affordability issues.
Tensions emerge as house prices continue to rise
A strong economic backdrop has led to a near 10-year high in consumer confidence, but evidence of tensions in the housing market have emerged as a result of rising affordability issues.
Westpac-Melbourne Institute’s consumer sentiment survey showed that in March the index rose by 2.6 per cent to 111.8 points and is now just 0.2 points below December’s decade high.
The rising consumer confidence reflects last week’s GDP figures showing that Australia’s economy is improving.
The big four bank said Australia’s containment of the virus, a vaccine rollout that will bring an end to the pandemic and an accommodating stimulatory government policies have all contributed to the sustained lift in consumer sentiment.
Despite an overall growth in consumers sentiment, Westpac said the survey showed “evidence of tensions emerging in the housing market”.
With the latest CoreLogic figures showing a 2.1 per cent increase in national dwelling prices for February, Westpac’s ‘time to buy a dwelling’ index slipped a further 3.6 per cent.
This is the fourth quarter in a row that values are down, with consumer sentiments around buying a home down 11.9 per cent from its peak in November.
“We have found this index to be closely linked to affordability in the past,” Westpac’s chief economist, Bill Evans, said.
“The decline suggests resurgent prices are already starting to curb buyer interest and that we may see some easing in the recent surge in demand from owner-occupiers, particularly from first home buyers who are the most sensitive to affordability.”
While consumers are less buoyed about buying a new dwelling, sentiment around future value continues to increase, with the index rising by a further 3.1 per cent in March to a new seven-year high.
House price expectations are particularly buoyant in NSW, Queensland and Western Australia, which are all predicted to grow up to 4.6 per cent.
“Surprisingly, expectations eased in Victoria, the state index easing back 2.1 per cent still 4 per cent below its pre-pandemic level,” Mr Evans said.
“To date, the optimism around house prices contrasts to reported attitudes towards ‘real estate’ as an investment option,” the economist concluded.
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